The Jewish Ethicist: Unequal Partnership

A partnership is all for one and one for all.

Q. When my friend and I began our partnership I anticipated our contributions would be about equal. But now I see that despite all the efforts of my partner, it is my abilities that are really responsible for our business success. Am I entitled to a larger share of the profits?

A. Partnerships are a most practical and durable form of business relationship. They have persisted in little-modified form since ancient times. When two people work together, they share risk and knowledge and take advantage of specialized abilities. The Talmud has a concise expression of the advantage of working in tandem. When explaining why a partner is not allowed to unilaterally break off the relationship before the stipulated time, even if he is willing to share in any losses, the sage Rava states succinctly: "The luck of two is better." (1)

While partnerships were known in the era of the Talmud, in later times and in particular with the flourishing of Jewish commerce in medieval times they became an immensely popular arrangement, and in the responsa literature we find a very highly developed legal theory of partnerships. One principle we find consistently is that in the absence of any explicit agreement, the assumption is that profits are shared equally. Thus we find in the Talmud:

Shmuel stated: Two people who mingled funds [for a business – even] if one invested one hundred and the other two hundred, the profits are shared equally. (2)

The business logic behind Shmuel's statement is that in most partnerships the efforts of the partners are a much more important contributor to success than the amount of money initially invested, so unless there is an explicit stipulation to the opposite we should assume that the intention was to split profits equally.

Naturally that doesn't mean that one partner can shirk and leisurely share in the profits of his hard-working partner. One of the great medieval authorities, the Rashba (Rabbi Shlomo ben Adret) writes that if a partner contributes only minimal efforts, this is considered a fundamental breach of the partnership agreement, and the partner is not entitled to a share of the profits. He is at most entitled to a modest salary for his efforts. (3) The opposite can also happen: if one partner invests efforts or resources that are clearly above and beyond what is called for in the agreement, he may be entitled to extra payment, in the form of salary or reimbursement, for his efforts. But he does not get an enlarged share of profits.

What all of these sources have in common is that the presumption of equal share of profits is a nearly unshakeable one, as long as there is no breach of the agreement. Even if the contributions are unequal, in money or in effort, they are either ignored or dealt with outside of the profit-sharing arrangement.

The situation you describe is common and perhaps even the norm in new businesses. When a business is founded, no one knows where the winds of commerce will blow. Who could have known, when Apple Computer was founded by two friends that in the future being a brilliant programmer and engineer like Stephen Wozniak would become virtually a standardized input, whereas being able to imagine the future of the market would become the main source of profitability? In other industries the opposite happened: the market went to people who could respond to the market with solidly designed products, not those who could anticipate the market. When you and your partner went into business together, you in effect purchased equal shares of stock; your increased contribution cannot change that reality.

On the other hand, if you really believe that your contribution is the key to your business' success, then you have the right to go off on your own. Assuming you didn't define a specific term for your partnership, it can be broken off at any time. Of course dissolving a partnership can be a complex matter; when there is a going concern typically one partner will have to buy out the other, and the valuation of the company can be as contentious as the valuation of the partners' contribution to profitability. Perhaps this is really the best course of action for you, or perhaps the prospect of having you do so will persuade your partner to make some changes in your agreement.

However, as long as you continue doing business under the original understanding, and as long as each partner continues to contribute his best efforts to advancing the business according to what was originally demanded and expected, changes in the conditions of the partnership can be made only by mutual consent of the partners.

About the Author

Rabbi Dr. Asher Meir is Research Director at the Business Ethics Center of Jerusalem (www.besr.org). He studied at Harvard, received a PhD in Economics from MIT, and rabbinic ordination from the Israeli Chief Rabbinate. Prior to moving to Israel, he worked at the Council of Economic Advisers in the Reagan administration. Rabbi Dr. Meir is also a Senior Lecturer in Economics at the Jerusalem College of Technology and has published several articles on business, economics and Jewish law. He is the author of the two-volume, "Meaning in Mitzvot (Feldheim), and his Aish.com columns form the basis of the "Jewish Ethicist" book (ktav.com).

My nephew is having his bar mitzvah and I am thinking of a gift. In the old days, the gift of choice was a fountain pen, then a Walkman, and today an iPod. But I want to get him something special. What do you suggest?

The Aish Rabbi Replies:

Since this event celebrates the young person becoming obligated in the commandments, the most appropriate gift is, naturally, one that gives a deeper understanding of the Jewish heritage and enables one to better perform the mitzvot! (An iPod, s/he can get anytime.)

With that in mind, my favorite gift idea is a tzedakah (charity) box. Every Jew should have a tzedakah box in his home, so he can drop in change on a regular basis. The money can then be given to support a Jewish school or institution -- in your home town or in Israel (every Jews’ “home town”). There are beautiful tzedakah boxes made of wood and silver, and you can see a selection here.

For boys, a really beautiful gift is a pair of tefillin, the black leather boxes which contain parchments of Torah verses, worn on the bicep and the head. Owning a pair of Tefillin (and wearing them!) is an important part of Jewish identity. But since they are expensive (about $400), not every Bar Mitzvah boy has a pair. To make sure you get kosher Tefillin, see here.

In 1944, the Nazis perpetrated the Children's Action in the Kovno Ghetto. That day and the next, German soldiers conducted house-to-house searches to round up all children under age 12 (and adults over 55) -- and sent them to their deaths at Fort IX. Eventually, the Germans blew up every house with grenades and dynamite, on suspicion that Jews might be in hiding in underground bunkers. They then poured gasoline over much of the former ghetto and incinerated it. Of the 37,000 Jews in Kovno before the Holocaust, less than 10 percent survived. One of the survivors was Rabbi Ephraim Oshri, who later published a stirring collection of rabbinical responsa, detailing his life-and-death decisions during the Holocaust. Also on this date, in 1937, American Jews held a massive anti-Nazi rally in New York City's Madison Square Garden.

Love comes from "giving to someone." When you do altruistic acts of kindness, you are giving the other person part of yourself. You will therefore feel love for the recipient of your acts of kindness - because you will find yourself included in the other person and you will identify with him. Just as you love yourself, so too will you love the other person.

The ultimate level to strive for is that even if someone wrongs you, you will view it the same as if someone's right hand accidentally cut their own left hand. Of course while you will try to prevent this from happening, you will not take revenge on your own hand!!

The degree of love as you have for yourself is the degree of love we should have for others.

Today, think of a specific person who would gain greatly from your being more giving. (If you can't think of anyone, that person might be you...)

Although actions generally have much greater impact than thoughts, thoughts may have a more serious effect in several areas.

The distance that our hands can reach is quite limited. The ears can hear from a much greater distance, and the reach of the eye is much farther yet. Thought, however, is virtually limitless in its reach. We can think of objects millions of light years away, and so we have a much greater selection of improper thoughts than of improper actions.

Thought also lacks the restraints that can deter actions. One may refrain from an improper act for fear of punishment or because of social disapproval, but the privacy of thought places it beyond these restraints.

Furthermore, thoughts create attitudes and mindsets. An improper action creates a certain amount of damage, but an improper mindset can create a multitude of improper actions. Finally, an improper mindset can numb our conscience and render us less sensitive to the effects of our actions. We therefore do not feel the guilt that would otherwise come from doing an improper act.

We may not be able to avoid the occurrence of improper impulses, but we should promptly reject them and not permit them to dwell in our mind.

Today I shall...

make special effort to avoid harboring improper thoughts.

With stories and insights,
Rabbi Twerski's new book Twerski on Machzor makes Rosh Hashanah prayers more meaningful. Click here to order...